ATO Interpretative Decision
ATO ID 2004/64 (Withdrawn)
ExciseEnergy Grants (Credits) Scheme: off-road - agriculture - drilling wells for water
FOI status: may be released
This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.
Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of the period the Act was in force, 1 July 2003 up to and including 30 June 2012.This document has changed over time. View its history.
Status of this decision: Decision Withdrawn 1 July 2012
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Is drilling wells for ground water on an agricultural property an 'agricultural soil/water activity' as defined in section 24 of the Energy Grants Credits Scheme Act 2003 (EGCSA)?
Yes. Drilling wells for ground water on an agricultural property is an 'agricultural soil/water activity' as defined in section 24 of the EGCSA.
The entity operates a business drilling wells for ground water.
The entity is contracted by an agricultural property owner to drill wells for water. The drilling for water takes place on an agricultural property where a core agricultural activity is carried on, and the ground water is only for use in an agricultural activity.
Drilling activities involve test drilling. If the test drilling at one site is not successful the drill rig moves to another site to undertake further test drilling. A bore is established when suitable water is found.
Reasons for Decision
Under the Energy Grants Credits Scheme an entity is, subject to certain conditions, entitled to an energy grant if they purchase diesel fuel for use by them in one of the defined activities, including 'agriculture'.
'Agriculture' is defined in section 22 of the EGCSA and includes an 'agricultural soil/water activity'.
The definition of an 'agricultural soil/water activity' in section 24 of the EGCSA includes:
The entity's drilling activities are carried out on an agricultural property where a core agricultural activity is carried on, and are carried out by a person who is contracted to the person carrying out the agricultural activity the water is for use in.
Therefore, the entity's activities will be an agricultural soil/water activity if they constitute:
- the searching for ground water solely for use in an agricultural activity, and/or
- the construction or maintenance of facilities for the extraction of such water.
The Macquarie Dictionary 2001 rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'search' as 'to go or look through carefully in seeking to find something', and 'the act of searching; careful examination or investigation.' The test drilling and movement of the drilling rig to different places on the agricultural property to drill for ground water until it is found, amount to 'searching' for ground water, as it is through such examination and investigation that the ground water being searched for is found.
Accordingly, drilling wells for water on an agricultural property is an 'agricultural soil/water activity' as defined in section 24 of the EGCSA.Date of decision: 5 January 2004
ATO ID 2004/63
The Macquarie Dictionary 2001 rev. 3rd edn, The Macquarie Library Pty Ltd, NSW
EGCS searching for ground water as an agricultural soil/water activity